Do You Need To Pay Employment Taxes? If you have a household employee, you may need to withhold and paysocial security and Medicare taxes, or pay federal unemployment tax,or both. To find out, read Table 1 on page 3. You do not need to withhold federal income tax from your householdemployee's wages. But if your employee asks you to withhold it, youcan choose to do so. See Do You Need To Withhold Federal IncomeTax? on page 5. If you need to pay social security, Medicare, or federalunemployment tax or choose to withhold federal income tax, readTable 2 on page 4 for an overview of things you may need todo. TaxTip: Child and dependent care expenses. If your householdemployee cares for your dependent who is under age 13 or for yourspouse or dependent who is not capable of self care, you may be ableto take an income tax credit of up to 30% of your expenses. Toqualify, you must pay these expenses so you can work or look for work.If you can take the credit, you can include in your qualifyingexpenses your share of the federal and state employment taxes you pay,as well as the employee's wages. For information about the credit, getPublication 503, Child and Dependent Care Expenses. If you do not need to pay social security, Medicare, or federalunemployment tax and do not choose to withhold federal income tax,read State employment taxes, next. The rest of thispublication does not apply to you. State employment taxes.You should contact your state unemployment tax agency to find outwhether you need to pay state unemployment tax for your householdemployee. For the address and phone number, see the list beginning onpage 11 of this publication. You should also find out whether you needto pay or collect other state employment taxes or carry workers'compensation insurance. Table 2 Social Security and Medicare Taxes The Federal Insurance Contributions Act (FICA) provides for afederal system of old-age, survivors, disability, and hospitalinsurance for workers and their families. The social security tax paysfor old-age, survivors, and disability benefits. The Medicare tax paysfor hospital insurance. Both you and your household employee may owe social security andMedicare taxes. The taxes for each of you are 7.65% (6.2% for socialsecurity tax and 1.45% for Medicare tax) of the employee's socialsecurity and Medicare wages. ERROR MSGYou are responsible for payment of your employee's share of thetaxes as well as your own. You can either withhold your employee'sshare from the employee's wages or pay it from your own funds. Pay thetaxes as discussed under How Do You Make Tax Payments? onpage 6. Also, see What Forms Must You File? hoteles en Aalborgon page 7. Social security and Medicare wages.Hoteles y desayuno SandsliYou figure social security and Medicare taxes on the socialsecurity and Medicare wages you pay your employee. If you pay yourhousehold employee cash wages of $1,200 or more in 2000, all cashwages you pay to that employee in 2000 (regardless of when the wageswere earned) are social security and Medicare wages. If you pay theemployee less than $1,200 in cash wages in 2000, none of the wages youpay the employee are social security and Medicare wages, and neitheryou nor your employee will owe social security or Medicare tax onthose wages. State disability payments treated as wages.Certain state disability plan payments that your household employeemay receive are included as social security and Medicare wages. Formore information about these payments, see the instructions forSchedule H (Form 1040), ERROR MSGHousehold Employment Taxes, and thenotice issued by the state. Wages not counted.Do not count wages you pay to any of the following individuals associal security and Medicare wages, even if these wages are more than$1,200 during the year. Your spouse. Your child who is under age 21. Your parent. Exception: Count these wages if bothof the following conditions apply. Your parent cares for your child who lives with you andeither is under age 18 or has a physical or mentalcondition that requires the personal care of an adult for at least 4continuous weeks in a calendar quarter. You are divorced and have not remarried, or you are a widowor widower, or you are living with a spouse whose physical or mentalcondition prevents him or her from caring for your child for at least4 continuous weeks in a calendar quarter. An employee who is under age 18 at any time during the year. Exception: Count these wages if providing householdservices is the employee's principal occupation. If the employee is astudent, providing household services is not considered to be his orher principal occupation. hotel rooms ReadingAlso, if your employee's social security and Medicare wagesreach $76,200 in 2000, do not count any wages you pay that employeeduring the rest of the year as social security wages to figure socialsecurity tax. (But continue to count the employee's cash wages asMedicare wages to figure Medicare tax.) Cash wages.Cash wages include wages you pay with checks, money orders, etc.Cash wages do not include the value of food, lodging, clothing, andother noncash items you give your household employee. However, cashyou give your employee in place of these items is included in cashwages. If you give transit passes to your employee or reimburse youremployee for the amount paid for transit passes used to commute toyour home, do not count as wages the value of the transit passes orreimbursement (up to $65 per month). A transit pass includes any pass,token, farecard, voucher, or similar item entitling a person to rideon mass transit, such as a bus or train. If you provide parking to your employee or reimburse your employeefor the amount paid for parking at or near your home or at or near alocation from which your employee commutes to your home, do not countas wages the value of the parking or reimbursement (up to $175 permonth). Withholding the employee's share.You should withhold the employee's share of social security andMedicare taxes if you expect to pay your household employee socialsecurity and Medicare wages of $1,200 or more in 2000. However, if youprefer to pay the employee's share yourself, see Not withholdingthe employee's share, next. You may withhold the employee's share of the taxes even if you arenot sure your employee's social security and Medicare wages will be$1,200 or more in 2000. If you withhold the taxes but then actuallypay the employee less than $1,200 in social security and Medicarewages for the year, you should repay the employee. Withhold 7.65% (6.2% for social security tax and 1.45% for Medicaretax) from each payment of social security and Medicare wages. You canuse the table on page 14 to figure the proper amount to withhold.Instead of paying this amount to your employee, you will pay it to theIRS with a matching amount for your share of the taxes. Do notwithhold any social security tax after your employee's social securitywages for the year reach $76,200. If you make an error by withholding too little, you should withholdadditional taxes from a later payment. If you withhold too much, youshould repay the employee. Example.You hire a household employee (who is an unrelated individual overage 18) to care for your child and agree to pay cash wages of $100every Friday. You expect to pay your employee $1,200 or more for theyear. You should withhold $7.65 from each $100 wage payment and payyour employee the remaining $92.35. The $7.65 is the sum of $6.20($100 6.2%) for your employee's share of social security taxand $1.45 ($100 1.45%) for your employee's share of Medicaretax. You will match the $7.65 you withhold with $7.65 from your ownfunds when you pay the taxes. Not withholding the employee's share.If you prefer to pay your employee's social security and Medicaretaxes from your own funds, you do not have to withhold them from youremployee's wages. The social security and Medicare taxes you pay tocover your employee's share must be included in the employee's wagesfor income tax purposes. However, they are not counted as socialsecurity and Medicare wages or as federal unemployment (FUTA) wages. Example.You hire a household employee (who is an unrelated individual overage 18) to care for your child and agree to pay cash wages of $100every Friday. You expect to pay your employee $1,200 or more for theyear. You decide to pay your employee's share of social security andMedicare taxes from your own funds. You pay your employee $100 everyFriday without withholding any social security or Medicare taxes. Foreach wage payment you will pay $15.30 when you pay the taxes. This is$7.65 ($6.20 for social security tax plus $1.45 for Medicare tax) tocover your employee's share plus a matching $7.65 for your share. Forincome tax purposes, your employee's wages each payday are $107.65($100 plus the $7.65 that you will pay to cover your employee's shareof social security and Medicare taxes). Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and stateprogram under the Federal Unemployment Tax Act (FUTA) that paysunemployment compensation to workers who lose their jobs. Like mostemployers, you may owe both the federal unemployment tax (the FUTAtax) and a state unemployment tax. Or, you may owe only the FUTA taxor only the state unemployment tax. To find out whether you will owestate unemployment tax, contact your state's unemployment tax agency.See the list of state unemployment agencies in the Appendix on page 11for the address. The FUTA tax is 6.2% of your employee's FUTA wages. However, youmay be able to take a credit of up to 5.4% against the FUTA tax,resulting in a net tax of 0.8%. But to do so, you must pay all therequired contributions for 2000 to your state unemployment fund byApril 16, 2001. The credit you can take for any contributions that youpay for 2000 after April 16, 2001, is limited to 90% of the creditthat would have been allowable if the contributions were paid on orbefore April 16, 2001. Pencil: You must complete the following worksheet to figure the credit forlate contributions. Graphic Pay the tax as discussed under How Do You Make Tax Payments?on page 6. Also, see What Forms Must You File? on page 7. Caution: Do not withhold the FUTA tax from your employee's wages. You mustpay it from your own funds. The FUTA tax is not included in youremployee's wages for income tax purposes. FUTA wages.You figure the FUTA tax on the FUTA wages you pay. If you pay cashwages to household employees totaling $1,000 or more in any calendarquarter of 2000, the first $7,000 of cash wages you pay to eachhousehold employee in 2000 and 2001 is FUTA wages. (A calendar quarteris January through March, April through June, July through September,or October through December.) If your employee's cash wages reach$7,000 during the year, do not figure the FUTA tax on any wages youpay that employee during the rest of the year. For a discussion of"cash wages," see page 4. If the cash wages you pay is less than $1,000 in each calendarquarter of 2000, but you had a household employee in 1999, the cashwages you pay in 2000 may still be FUTA wages. They are FUTA wages ifthe cash wages you paid to household employees in any calendar quarterof 1999 totaled $1,000 or more. Wages not counted.Do not count wages you pay to any of the following individuals asFUTA wages. Your spouse. Your child who is under age 21. Your parent. Example.You hire a household employee (who is not related to you) onJanuary 1, 2000, and agree to pay cash wages of $200 every Friday.During January, February, and March you pay the employee cash wages of$2,600. Because you pay cash wages of $1,000 or more in a calendarquarter of 2000, the first $7,000 of cash wages you pay the employee(or any other employee) in 2000 or 2001 is FUTA wages. The FUTA wagesyou pay may also be subject to your state's unemployment tax. During 2000, you pay your household employee cash wages of $10,400.You pay all the required contributions for 2000 to your stateunemployment fund by April 16, 2001. Your FUTA tax for 2000 is $56($7,000 0.8%).